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Real estate can be one of the most highly valued assets within an estate. Dealing with its sale or transfer effectively may be the greatest challenge and opportunity for the Executor or Personal Representative (PR).
Prior to activity to sell real estate the powers to sell property must be granted by the probate court or trust agreement. With this secured and with receiving legal advice throughout the process from an estate planning attorney the Personal Representative can proceed to sell real estate.
There are a number of unique costs associated with real estate, some of these costs or more obvious than others. There are monetary costs in holding real estate in an estate, opportunity costs, such as, what the proceeds would have earned in a money market account, if the property was sold at an earlier date. Another time related cost is the amount of time and attention, the PR must devote to the sale of the real estate properties.
Perhaps, the greatest cost is the silent “emotional cost” placed on the PR to be surrounded by all of the deceased loved one’s personal effects and faced with the reality that everything “must go” somewhere else. On this subject see our article: “Dealing with personal effects”.
The following is a variety of challenges and opportunities that a Personal Representative may face when selling real estate within the context, of their new-found fiduciary duties.
- No ready market for real estate exists (as compared to stocks or bonds)
- Unknown future sale price and net proceed amounts
- Transaction costs
- High carrying cost (maintenance, insurance, mortgage, taxes, etc.)
- Length of time to sell asset.
- Distance (may be located in different state)
- The unknown? - vacant homes and properties, are susceptible to; theft, vandalism, frozen or broken pipes, and who knows what else?
- Decay, improved real estate if left alone, will usually decline in value over time (in varying degrees).
- Prospective buyers may feel that an “Estate Sale” gives them a competitive advantage in negotiations.
- Potential stress of “need to sell property” to raise funds for taxes, or make distributions to beneficiaries.
- You only need one buyer
- Seller can set the price and “everything is negotiable”
- Appraisals can be helpful, but they don’t tell the full story.
- Property can be enhanced, to improve marketability and sales price.
- Timing – Real estate many times has a “selling season”
- A well selected Realtor can be a valuable resource.
- Marketing, Marketing, Marketing
- Think about creative opportunities. Ask around…
- “In Kind” distributions to beneficiaries
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